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Net Neutrality: A Solution in Search of a Problem



November 10, 2011

A solution in search of a problem. That’s the best way to describe the Net Neutrality regulations that the Senate is currently debating in anticipation of a vote later today.

The Internet is not broken. Given the present state of our economy, it is one of the few sectors that could be described as such. In just the past decade the number of Internet users has soared from 513 million to more than 2.1 billion. It has not only fundamentally changed how individuals learn, communicate, and work, but has spawned an entire economic ecosystem, without which Google, Apple, Facebook, and thousands of other companies (and the jobs they created) would not exist.

Moreover, all of this growth and innovation has occurred in large part without government regulation. Indeed, it is not a stretch to say that the Internet is the definitive free-market success story of our generation. Sadly, that hasn’t stopped Washington from wanting to gets its hands on it. And unlike Midas (or Steve Jobs, if we’re sticking to the theme), everything the government touches does not turn to gold.

By way of background, Net Neutrality is the principle that Internet service providers should not block or slow-down consumer’s access to networks. The fear, as Sen. John Kerry (R-MA), explained on the Senate floor yesterday, is that “the people who control those access points [to the Internet] can start discriminating about who gets access at what speed . . . and begin to charge mo"re for [faster access].”

Except there is little evidence that would ever happen. What supporters of Net Neutrality seem to forget is that consumers tend to not like getting shoddy, slow, or overpriced service.

That’s one of the reasons  internet service providers have been falling all over themselves to invest in the needed infrastructure. Consider the recent battle between Verizon Wireless and AT&T – each of which have spent millions of dollars in an ad war about the relative strength of their mobile “3G” networks. Consumers are increasingly savvy about these sorts of things and the free market has worked to keep them not only honest, but pushing for improvement. That’s one of the reasons that 93 percent of broadband subscribers are happy with their service – more than 10 times higher than the 9 percent approval rating Americans give Congress.

But while Net Neutrality proponents rest their claims on unfounded predictions of some future harm, the threat of the FCC’s proposed regulations are very real.

Implementing Net Neutrality regulations would require the FCC to have deep access to the business practices of the regulated internet service providers. This would include the ability to constantly monitor and draw data from network structures, content types, delivery modes and speed, applications, user preferences, and usage activity. This is not merely a privacy concern. It would equip the FCC with a vast body of information that could enable the implementation of a long-sought Internet taxation scheme. And with Democrats constantly on the search for more revenues to fund their spending habits, the temptation for Internet tax schemes grows.

In searching for a solution to a phantom problem, the federal government threatens to create a very real one – stifling investment in our most promising source of economic growth. There is no market failure here that requires the government to regulate. Rather, the Internet is a free market success story that, if Net Neutrality regulations proceed, could end up with a very sad ending.


 

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